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CDS Can Move... But It Needs A Reason

01 September 2016 by lberuti

Since the beginning of 2016, oil has already been twice in bull run (commonly defined as a move in excess of 20% from the trough) and once in a bear run. The 12% down move since mid-August is bringing WTI close to its second bear market of the year, and it begins to impact energy related companies, which have been under pressure over the last few sessions. CDS price action has been subdued but hybrid debt instruments have been marked down as a result. That makes REPSM’s ( Repsol SA ) CDS 14bps tightening today even more remarkable. REPSM and Caixa SA own respectively 30% and 34% of GASSM ( Gas Natural SDG SA ). The companies confirmed to the Spanish market authority that they are in talks with private equity groups to sell about 10% of GASM’s shares each. The sale could value the 20% combined stake at about €4Bln. Even though REPSM added that “this analysis is in a preliminary phase”, it is consistent with the slashing of spending and asset sales that oil companies have had to undertake to adapt to the rout in crude prices of the last couple of years.